16. SUBSEQUENT EVENTS

Management has evaluated all events and transactions that occurred from October 1, 2016 through the date these condensed consolidated financial statements were issued for subsequent events requiring recognition or disclosure in the condensed consolidated financial statements.

On October 28, 2016, the Company announced that it filed a registration statement on Form S-1 with the Securities and Exchange Commission (the “SEC”) for a rights offering to its existing shareholders and public warrant holders. The proposed rights offering will consist of non-transferable subscription rights to purchase up to an aggregate of 1,000,000 units, each unit consisting of one share of redeemable Series 1 Preferred Stock and one Series 1 Warrant to purchase 10 shares of common stock, at an exercise price of $13.50 per unit. Holders of the Series 1 Preferred will be entitled to receive cumulative dividends at the rate of 9% of the purchase price per year for a term of seven years, payable quarterly. Each Series 1 Warrant may be exercised at any time within 7-years of issuance by surrendering one share of Series 1 Preferred. Assuming the rights offering is fully subscribed, the Company would receive gross proceeds of approximately $13.5 million. If successful, the rights offering proceeds would be used to retire certain of the Company’s current debt obligations, provide funds for store-related growth and for general working capital. The record date of the rights offering has not yet been determined. There is no guarantee that the rights offering will be consummated, or if it is consummated that it will raise sufficient capital to enable the Company to continue to execute its business strategy as currently contemplated. A registration statement relating to these securities has been filed with the SEC but has not yet become effective. The securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. There will not be any sale of these securities in any state in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such state.